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Your Signature is Valid.

Even if credit card companies don’t require signatures anymore, signatures are important. Signing deals that don’t benefit you in the future can be held against you.

Making deals without a Crystal Ball, escalator clause, or opportunity to get out can be harmful to your bottom line. Recently, in Blackhawk county, a couple who entered into a lopsided deal to sell 80 acres of prime ground to the renter were held to have entered into a valid contract, despite their attorney’s legal maneuvers to get it declared a future gift. The deal called for a set price to purchase the farm by the tenant when the couple died. The couple had advice of multiple lawyers (one who strongly recommended against it) and after inking the deal in 2010, had seller’s remorse in 2015. The right to purchase required the farm ground to not be developed or a penalty was to be paid, and the purchasing tenants had to be married at the time of purchase. That, along with the promise to pay, was enough to have the court declare the agreement binding.

Spraying Can Lead to Suing.

Pesticides drift when the weather and applicator are out of sync with one another. Sometimes it’s just physics and the weather, but sometimes its operators distracted by Snapchat. Regardless, if you are in the receiving or giving end of a spray drift situation, consider the following Document.

Pictures are worth 1000 words and 1000 words can paint a great picture. Document all potential evidence, including taking photographs or samples of damage, keeping a log of spray applications made in the area, noting any custom applicators applying pesticide in the area, documenting environmental conditions like wind speed, direction, and temperatures, and getting statements from any witnesses who might have seen the recent application. Photograph for weeks to track the damage to the plants. The more evidence, the better. Get an agronomist or scout in to look at the damage both sooner and later. The State has lab facilities that can be used to help identify damage, but they are one lab for an entire state of farms. Plus, the fines that state regulators assert don’t go to your bottom line.

Consider talking with your agronomist in advance regarding where samples might be sent in case of a potential claim, and consider how to preserve the evidence effectively before you are watching your field wilt before your eyes.

Talk

Make clear maps of what your fields are, how to get to them, and what products you are looking to have on them. Share them with your custom applicators and ask questions to make sure they understand. Taking time to talk with neighboring operators can be very important. Before the season gets rolling, having a conversation with neighboring operators about who is growing what, consideration for tolerant varieties, and identifying nearby sensitive crops can help avoid damage. Also, misery loves company, check with the neighbors to see if they received any unexpected damage.

Weigh the Price to be Paid.

Damage to a crop from spray drift can result in in damages for the impacted operator.  

An initial consideration is to analyze who to sue. The custom operator who has no insurance and drives a 1974 Jeep Truck may not have insurance to cover your claims. That may result in you spending dollars to get a piece of paper that says you are owed money and nothing more. Consider the costs of litigation. It is like poker, paying $10,000 in to see if you can win $7,000 more is not math a lot of people accept.

In other Ag News

New Mexico State Land Commissioner Dunn alleges that Texas landowners are stealing NM water and selling it back across the border for fracking. This presents an interesting issue of how neighboring states deal with differing legal approaches to groundwater. In Texas, a landowner owns his groundwater and use is governed by the rule of capture, but in New Mexico, prior appropriation is the rule and a person has to obtain a permit from the state to use groundwater.

We don’t have a water issue like this in Iowa yet, but continued demands for water may lead to such fights with our neighbors in the future.


Farm Bill Mark Up and Debate

The house and the Senate have wildly different versions of the bill and the Senate one seems to curry more favor with producer groups.

John Deere sues AGCO and Precision Planting Over Alleged Patent Infringement. 

John Deere claims that AGCO and Precision Planting’s new high-speed planters infringe on patents for ExactEmerge planter.  Funny how this claim comes out right after regulatory approval to buy Precision was not granted. Todd Janzen, an Ag Tech lawyer, points out, because the Deere patent is still a toddler (2014) this case has a lot of dollars at stake and will likely be extremely hard-fought by both sides.

The steak dinners, unsolicited seed corn caps with questionable logos, are long burned or covered with grease. The claim regarding Sygenta’s interference with the US Corn market appears to be reduced to a number. The settlement committee reached a preliminary agreement and submitted it to the court for approval the second week of March.

In summary, if the court approves the settlement:

Syngenta will owe $1.51 billion to four groups, with maximum settlement cap amounts for 3 groups. The remainder after distribution to these 3 groups, a minimum of $1.44 billion, is to be distributed to group 1.

The four settlement groups were defined as:

  1. 1. Growers who did not use Duricade or Viptera
  2. 2. Growers who did use Duricade or Viptera (max $22.6M)
  3. 3. Grain handlers (max $29.9M)
  4. 4. Ethanol producers (max $19.5M)

Years of production are 2013/14 through 2017/18 and a “weighted average” percentage will be used as follows:

                2013/14 = 26%

                2014/15 = 33%

                2015/16 = 20%

                2016/17 = 11%

                2017/18 = 10%

Yield will be determined solely by FSA578s (certified production records) with the exception of landlords who will have a claim form. The calculation for settlement, though, will be acres x average county yield per acre x weighted average. If not FSA 578, it would appear that crop insurance records would be used.

The settlement does not allow for silage or “fed on farm” corn. Dairy and Beef producers who walk the corn off the farm instead of trucking it will not be making a claim for that production that was fed.

 If the settlement is approved:

The 1st notice is to be mailed 10 days from approval of this proposed agreement. The opt-out deadline is 90 days from the mailing of the 1st notice. Claims deadline is 150 days from the mailing of the 1st notice. Final payment of Syngenta escrow to fund the settlement is April 1, 2019.

Unfortunately, it is still impossible to estimate a per bushel settlement value.

This will come potentially as farmers are distracted by spring activities. These settlements rarely have a second chance if the initial deadline is missed. Even those who have “signed up” and provided information to an attorney should be on the lookout for the settlement documents, and they should follow through with the required steps to ensure they are counted in the distribution. I expect a heavy advertising campaign will ensue to make sure all producers are counted. The plan calls for using government records to generate lists of people to contact.

Don’t bid up the neighbor’s rent just yet, but the chances are increasing that a small windfall might be coming to the producers who marketed corn over the years 2012-2018.

Pay to Play, the government plans to have you pay them to do their job when you need something from them.

Infrastructure Spending

 The ag economy relies on government funded/supported roads, railways, ports and locks, and dams to get the product to the end user. A proposal to spend money on Infrastructure should be as interesting to a farm producer as the farm bill. Like all ideas, the devil is always in the details. In the latest proposal from the White House, they want to spend $200 billion on federal funded projects over the next ten years (with 25% of that number targeted to rural areas) it appears to be a pay as you go proposal.

The initial review of the plan looks to come from tolls and fees on the users of the improved infrastructure. Fear not, those costs will be passed along to the end consumer. Additionally, the plan will rely on the participation of state and local governments paying in to the projects bottom line. In some cases, they will have to fund 90% of the project and match funds to the federal dollars. Those funds are projected to come from property taxes, sales taxes, and user fees. The problem with this concept is that stressed local governments with razor thin budgets will simply forego the attempt to secure the match grant, while the areas that are economically strong will harvest those grants far easier.

Where state and local governments are not involved, the plan looks to the private sector. Specifically, the plan anticipates private industry maintaining river waterways including, locks and dams.

Farm Bill Talk

The latest proposals on the anticipated farm bill show that crop insurance copays by the producer will increase (but still having the government pay over ½ of the insurance premium) and industries that rely upon USDA services, like meat inspection, will face increased user fees for the government to do its job. Additionally, cuts in conservation program technical assistance aid are projected. The cuts and caps on copays are aimed at farm operators whose adjusted gross income is above $500,000. Using numbers from 2013, that would be about 2% of farmers effected.

Crop insurance subsidies are not necessarily a bad thing, as crop insurance in advance of a disaster is far easier to administer in the time of a disaster than the ad hoc disaster relief bills of the 1980s that used to be passed after an ag disaster like a drought. Those “after the cat is out of the bag” programs are harder to manage, implement, and enforce than standing programs.

 Tax Law Changes

The tax law updates are already being examined for loop holes and advantages, as they should be. One giant loop hole appears to be the 20% credit off the gross sales made to a cooperative of ag products.  While the initial revelation was made with assertions that the language was hasty and not the intended result and would be corrected, no correction has been made.

The effect of granting a credit based off where a commodity is sold will have an impact on the market.  While this in an over simplification, if a seller of goods realizes that 20 cents of every dollar is not taxable when they sell at the coop, and it is taxable if they sell directly to a private processor like ADM, BUNGE, or the ethanol plant, the choice seems pretty clear.

The projection is that the cooperatives will be overloaded with willing sellers, so they will lower their asking price to curb sales to match storage and capacity to sell, while the processors will move their price to adjust for the taxation discount. That is good theory in an economics exam final, but its application in the country side is suspect. I think lobbyists for the cooperative industry and the processor industry will both be hard at work to keep the status quo, or they will make the change to avoid the preferential treatment.

Generally, people prefer their back yards to never change, ever. Even if the rules allow for something different that isn’t currently being done and double if the new permitted use is loud, smelly, or interrupts view.  New proposals for property use create challenges. Nobody wants a permitted use that they don’t particularly care for to occur, especially when it impacts them, regardless of what the current zoning rules may be. That is not how zoning works, the first in line do not get to control the narrative. Instead, we establish uses based on zoning districts (ag. Commercial, residential etc) .

By doing this we all give up certain rights to do things with our property in exchange for other privileges based on the zoning and services. When we live in an agriculture district and enjoy the wide-open spaces, we should expect that livestock production will occur in those spaces. When we live in the city and get our garbage picked up, streets plowed, and water piped to our tap, we give up some of our property rights (such as loud music, building on every square inch of your lot, or keeping animals) in exchange for those conveniences. As farms have lost their nostalgic appeal from yesteryear, and are in some circles villainized, understanding how new ag practices and production techniques impact your neighbors and the current zoning law, is as important as selecting the right chemical program for your row crop production enterprise.

In Iowa, a master matrix controls rules regarding location sites for livestock buildings. Other states allow counties or cities the power to develop zoning ordinances on this issue. Iowa producers would do well to remember the special protections ag zoning and the master matrix system affords them. Consider Minnesota, where counties are in the business of granting a conditional use permit (aka a Special use permit) for new livestock feeding operations. A special use permit gives permission to do something in a zoning district that you can’t do as a matter of right, but can conduct as long as you meet terms made by the zoning authority. However, those terms can’t be outlandish or unrelated to a zoning plan.

In a recent Minnesota case, the operator applied for a permit to build a 4,700-hog finishing facility, which met all the established criteria. After a public hearing, the county granted the application. The real estate agents attacked the permit issued on some specific grounds, claiming the county didn’t apply the law correctly. The real reason, to me, was that they didn’t want hog production in the area as they feared it would drive prices down. That is classic “not in my back-yard” material. The county, or other zoning authority, is given wide discretion on what decisions it makes; the court sided with the county in this case. The take away is that the local government appointees need to be plugged into what is going on in the local environment, and what the status of the law is. The down ticket local elections for supervisors and other locally appointed boards can shape what goes on in an area for a long time.

How long Iowa will maintain its favorable ag zoning is unknown. Last legislative session, environmental groups were seeking support from county level boards to put pressure on the Iowa legislature. Their goal is to loosen some of the control the master matrix has on livestock siting in Iowa. The Minnesota rubric may well seep south in the coming years if the ag community does not stay vigilant.

             

Wednesday, December 19, 2018
  • Patrick B. Dillon
  • Jill Dillon
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Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
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Jill Dillon focuses on family law, estate planning and IRS matters. Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill spent extensive time advocating for low income tax payers in front of the IRS and the State of Iowa Department of Revenue while at Drake.

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